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Moncloa postpones raising general VAT until 2013, but reduced VAT goes up

With two days to go before the Cabinet approves Spain's 2012 National Budget, it is keeping open a debate about an increase to taxes covered in national budget laws. The government wants to ensure that Spain's consumer spending, which is already dismally low, is not hampered by increased taxes.

Also, the Cabinet might postpone an increase to the general VAT tax (currently 18%) until 2013.

Are they saying that they will not touch this tax? Well, at this time, they are not saying "yes" or "no." If we put stock in what Mariano Rajoy said yesterday in Seoul, we have to believe that it will stay the same. "We do not want to change things that affect consumption," said the Prime Minister.

But if we pay attention to the Minister of Finance and Public Administrations, Cristóbal Montoro, that message is not as clear. The national budget will include "partial reforms of the major taxes and also revenues that are more balanced and weighted across the population of taxpayers," he said.

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